March 06, 2015 – DownstreamToday
Texas' Permian Crude Transport Backlog Should Subside
By: Lana Straub
West Texas' economy has been based on oil and gas for nearly a century. Because the Permian Basin is invested so heavily in the oil and gas industry, the region's businesses are used to its ups and downs.
The Permian Basin area has helped Texas become one of the United States' leaders in oil production, most recently during the oil boom that began within the past decade. Rig counts began building up in 2011 and have grown steadily until very recently….
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More oil in the pipeline
The Energy Information Administration (EIA) Permian Region Drilling Productivity Report for February 2015, which shows drilling data through January and projected through March, projected an average of 200 barrels per day (bpd) would be produced per each average rig in the Basin. Production from legacy wells is declining at a rate of 69,000 bpd; however, new wells coming online in the Permian Basin have increased production, translating into an extra net 30,000 bpd of crude oil entering the pipeline system.
"In the short term production will continue to increase as producers complete existing wells and move rigs to more highly productive 'sweet spots' that produce more oil," Sandy Fielden, RBN Energy's analytics director, said in a recent interview. "In the longer term," he cautioned, "the level of new drilling will be determined by the price environment – so production will either start to decline in response to prices below breakeven or recover if prices rise again."
